12.27.20167 min read

Is a Referral Partner Program Right For Your Business?

In theory, a referral partner program sounds ideal. Instead of hiring your own sales team, referral partners sell products and services on your behalf. They put in the time and the work to make the sale, and you pay them a commission in return.

In reality, a referral partner program isn’t that simple. You have to pay referral partners enough to incentivize them, but not so much that you end up losing money on their sales. You have to provide them with training and content to ensure they accurately represent your business. And if they engage in illegal activities while selling your product, you have to be prepared to take responsibility.

A referral partner program can help you scale your business at less cost in less time, but only if you’re prepared to manage it. Infusionsoft, for instance, offers a referral partner center that allows you to manage commissions, tracking links, document, content, emails, and more. But if you don’t have a strategy in place, a tool like that won’t be useful.

So, if you’re thinking about starting a referral partner program, ask these questions first.

Have you implemented personalized, automated marketing and sales?

Referral partner programs can be a lot of work for a business, sometimes even more than managing prospects and existing clients. Before you take on this new segment of contacts in your business, you want to make sure that you have implemented personalized, automated marketing and sales so that no prospective buyers or repeat sales slip through the cracks. If you still have holes in your funnel, consider using an application like Infusionsoft to automate your ideal sales and marketing funnel first.

Do you know how much it costs to acquire a new sale?

This is an important piece of information to know before bringing on referral partners. Industry standards for referral partner commissions vary, and if you don't know how much it costs your business to acquire a new sale without the help of a referral partner, you could put your business in a position to lose money with a program that pays too much.

For example, if it costs an average of $250 to gain a new sale and your industry's standard referral commission is $500 for the sale, it would make more sense for you to spend your marketing dollars in acquiring your own new leads to fill the top of your funnel.

How long does it take new prospects to become customers?

Just as important as knowing how much it costs your business to gain a new customer is knowing the average time it takes a new lead at the top of your sales funnel to become a customer. If you don't know, you could end up paying referral partners commissions for the work you are doing to convert the sale. If your automated funnel converts a qualified lead to a sale in 50 days, you will want to make sure your referral partners are only paid on new leads that convert in 45 days or less.  

Are your products or services sold on an e-commerce platform?

Referral partner programs are ideal for businesses with an e-commerce platform for sales. When you can use cookies or IP addresses to track which referral partners directed their contacts to your shopping cart, it's much easier for you to accurately and quickly track commissions for a given payment period. If you are processing sales offline, consider if it's worthwhile to ask each prospect if they were referred to your business and if so, by which partner and when.

Do you have an existing network that you trust to promote your business?

Your referral partners are essentially an extension of your business. Before you allow someone to represent your business, you want to make sure they align with your company's values, that their customer list aligns with your target market's profile, that they have a relationship with this audience, and that their business products or services complement yours instead of competing against you.  

Can you create content for your referral partners?

When it comes to growing your business through referrals, you need content available for your partners to quickly access and use to promote your business to their lists. This is the best way to ensure that your referral partners are accurately representing your business and to eliminate the potential for them to overpromise on your products or services. 

You also want to provide your referral partners with new or fresh content periodically to keep them engaged with the program and ensure they have new content to use when promoting your business to their contacts. If a referral partner continues to recycle the same handful of messages about your business, that content will become white noise to their audience. The referral partner will most likely experience a drop in sale conversions and become disengaged in your program. 

Do you have the time or a team in place to manage paying commissions in a timely manner?

You've made the promise to your referral partners that they would be paid commissions for the sales they help you generate. If you fail to follow through on that promise in a timely manner, you open yourself to legal repercussions and damage to your company's reputation. Only consider offering a referral partner program if you have time or support from your team to ensure commissions are paid on time.

Are you aware of the legal responsibilities and challenges of managing a referral partner program?

The number of legal responsibilities that must be considered when implementing a referral partner program is often a surprise to small business owners. If your referral partners engage in illegal activities in an effort to earn commissions, you could be liable for their actions. 

There are a number of steps you can take to protect yourself and your business. To start, create terms and conditions for a referral partner contract (you can find some pretty great templates to start with through a simple Google search), and then have an attorney review this to make sure you've covered all your bases.

You should also decide how you want to vet prospective referral partners to avoid bringing in anyone with a less than stellar reputation. Also, as mentioned previously, make sure you are providing your referral partners with approved content to use for their lists, and pay them on time.

If you are a business based in the United States, you should read through the FTC's Endorsement Guidelines, as well.

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Andrea Ramano has assisted hundreds of small businesses implement the application to support their unique sales and marketing needs. She has a knack for understanding complicated business processes in order to create streamlined workflows that are focused on achieving the desired results. She has worked in consultative and leadership roles for more than six years.

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